Fevertree Drinks (AIM:FEVR) PLC has been upgraded to ‘buy’ by HSBC even though cost headwinds are expected to impact profits in the short-term.
The London-listed company reported revenues of £311mln in its full year trading update, up 23% from the previous year, but external factors such as supply chain disruption continue to put pressure on profit margins, with underlying earnings (EBITDA) expected to stay flat.
Target price has been dropped to 2500p from 2700p as HSBC cut its own estimates for the next two years to match management’s guidance.
Looking ahead, however, HSBC cites the increasing popularity of the brand coupled with an unwinding of costs should lead to profit growth in the long-term.
Sales were down 6% in Europe compared to the previous 28-day period, with Great Britain, France and Italy driving improved sales in the continent.
US sales rose 46% year-on-year as ginger ales and sodas sales boosted the performance in the states, with HSBC saying that US sales were brought on by increase in volumes offset by lower prices